Dean Baker's Blog, page 228

The Trans-Pacific Partnership, International Trade and Arithmetic Problems at the Washington Post

The Washington Post ran an editorial yesterday worrying about the end of globalization. It told readers:

"Freshly released data from the World Trade Organization and other economic forecasts show that the world is on course for its third consecutive year in which growth in global trade will be lower than overall economic growth, which is itself anemic, according to the Wall Street Journal. The last such three-year streak ended in 1985."

There are several aspects to this that are striking. Fir...

Educating Joe Nocera on the Fed, Job Killing, and the Export-Import Bank

Joe Nocera seems to be obsessed with promoting the Export-Import Bank. Today he put out at least his fourth column on the topic, although this time he did refrain from calling his opponents "idiotic."

His story is that Republican opponents of the bank are "job-killers." (I'm not sure if this also applies to us non-Republican opponents.) Let's think this one through for a moment.

The basic story is that we have huge companies like General Electric and Caterpillar that get the vast majority of...

Fed Fails to Raise Rates in Timely Manner, End of the World Is Imminent

That's what folks must have been speculating about when they read Neil Irwin's account of the Fed's decision to put off a hike in interest rates this week. Near the end of the piece Irwin tells readers:

"As Stanley Fischer, the Fed vice chairman, said in a television interview last month, if the Fed waits until it is absolutely certain it is time to raise rates, it will probably be too late.

"In other words, Fed officials inevitably have to make a decision based on what their models predict,...

The Washington Post is Worried About Bubbles

The Washington Post is apparently disappointed that the Fed did not decide to raise interest rates and slow the pace of economic growth. Its editorial told readers:

"But there are risks [from not raising rates], too, such as the formation of asset bubbles and the sheer loss of credibility the Fed suffers every time it flirts with a new interest rate policy and then doesn’t deliver. The latter risk may have been compounded by the Fed’s so openly acknowledging that its decisions are subject to...

Bernie Sanders and the Wall Street Journal's $18 Trillion

The Wall Street Journal decided to take Senator Bernie Sanders' presidential campaign seriously enough to calculate the cost of the programs that he proposed. Their price tag was $18 trillion over the next decade. This is presumably supposed to scare people because, let's face it $18 trillion is a really big number.

Much of the fright factor disappears when we realize that $15 trillion of this $18 trillion comes from the WSJ's estimate of the cost of Sanders' universal Medicare program. That...

Even Jeb Bush Wants to End the Tax Deduction for Interest Payments

Andrew Ross Sorkin has a good piece today pointing out that Jeb Bush's tax plan calls for ending the deductibility for corporate interest payments. Under the current system the tax code effectively gives encouragement for companies to borrow, since the interest they pay is tax deductible.

Private equity companies take advantage of this provision, routinely having the companies they acquire borrow as much as possible, often to make payments to the private equity company. This leaves the acquir...

NPR Does Mind Reading on Overtime Rule, Also Tells Listeners Non-Profits Have Incompetent Managers

NPR had a bizarre piece on the Labor Department's new overtime rules which seemed intended to undermine support for them. These rules would increase from $23,660 to $50,440, the floor under which salaried workers would automatically qualify for overtime regardless of their work responsibilities.

While the piece does present the views on the new rules of Vicki Shabo, the vice-president of the National Partnership for Women and Families, the bulk of the piece is devoted to presenting the views...

The Elite's Childlike Commitment to Austerity

The landslide victory of left-wing candidate Jeremy Corbyn for Labor Party leader in the United Kingdom has many establishment types bent out of shape. The Blair-wing of the party was literally obliterated, with Corbyn drawing more than four times the votes of his nearest competitor. After giving the country the war in Iraq and the housing bubble whose collapse led to the 2008-2009 recession and financial crisis, the discontent of the Labour Party's rank and file is understandable.

But natura...

Grading the Bush Tax Cut Proposal

Josh Barro had an interesting piece where he asked several prominent public finance economists for their assessment of the growth impact of the tax cuts put forward by Jeb Bush as part of his presidential campaign. Barro noted a wide range of opinions, with some expecting little impact and others arguing that it would have a large positive impact on growth.

One of the people in the latter category was Boston University economist Larry Kotlikoff. According to Barro:

"He thought the Bush plan,...

The Success of Austerity in Spain: The Soft Bigotry of Incredibly Low Expectations

Paul Krugman rightly criticizes the proponents of austerity for claiming Spain as a success story. As Krugman points out, its economy is growing, but it has a long way to go to make up the ground lost in its downturn.

He makes this point in a graph showing log GDP, but this picture is actually too generous. We should care about GDP per capita, and here the story is even worse.

Spain's per capita GDP is still more than 7 percent below its peak in 2007. In fact the current level is roughly the...